Friday, October 31, 2008

SEC settled charges that Lazard failed to supervise three employees who collectively spent more than $600K while entertaining Fidelity traders. SEC also charged three employees and a supervisor for roles in securities laws violations by Fidelity traders. Earlier this year, the SEC charged Fidelity and employees for improperly accepting lavish gifts provided by brokers.

SEC found that former head of Lazard’s U.S. sales and trading and former RRs took trips to such destinations as Europe, Bahamas, Caribbean, Fla, and Napa Valley, CA, often by private plane, and paying for meals and lodging at high-end restaurants and hotels. According to SEC, Fidelity's head Trader Bruderman was provided with race car driving lessons, adult entertainment* and expensive wine, and that approximately $50K was contributed toward his bachelor party.

The Commission found failure to supervise at Lazard who agreed to pay $1,817,629 plus interest of $429,379.04, and penalty of $600K. More at Securities Law Prof Blog

Wednesday, October 29, 2008

Street officials argued on Tuesday that we need a new and different kind of regulation, rather than more of it. Nearly a thousand Wall Streeters braved rain and plunging stocks to attend the SIFMA annual meeting. Among others NY Mayor Bloomberg and former SEC Chair Pitt called for streamlined regulation. NYT/Reuters

Monday, October 13, 2008

McCain assertion that he will "fight corruption" on The Street. Palin said she and McCain would "get rid of the greed and corruption on Wall Street." Can someone point to specific proposals on how this will be carried out? ProPublica says no specific proposals. Obama flailing away at "eight years of deregulation" under W. Is he being modest? NYT on Greenspan ( points out, deregulation also strong under Clinton.Credit to

Regulators in Need of Rehab - Paulson on 7/20/08: "It's a safe banking system, a sound banking system. Our regulators are on top of it. This is a very manageable situation." May 16: "Looking forward, I expect that financial markets will be driven less by the recent turmoil and more by broader economic conditions."Who will decide which banks receive help and which won’t? What standards will be used? Apparently decisions fall to Neel Kashkari, assistant Treasury secy for financial stability, 35, six years out of B-school.

Wednesday, October 8, 2008

Commentary: Take garbage out on Wall St. Enough with propriety. Demand full disclosure?

Severance pre-bankruptcy? Fraud charges looming.Fuld and other Lehman execs facing inquiries statements about the bank’s position amounted to fraud. Fuld confronted with 6/8/08 internal memo including warnings about Lehman’s condition and asked the question, “Why did we allow ourselves to be so exposed?” Fuld said, “This does not look familiar to me.” Upset at exorbitant severance packages as Lehman headed to bankruptcy? “People in my block in Baltimore, if they perform poorly, they get fired, they certainly don’t get a bonus.”

Trading records suggest that in the panicked days when exotic derivatives were bringing the AIG to its knees, traders were using the same kinds of derivatives, called credit-default swaps, to profit from New Jersey's rising tide of red ink.

How the SEC (And Media) Failed Abysmally: The Times a blow-by-blow account of how the SEC knuckled under to pressure from major investment banks and threw capital requirements out the window -- planting the seeds for the ongoing financial meltdown. An unanswered question, only briefly dealt with in the article, is this: where was the financial press?

CJR Audit asks that same question: "Where was this story years ago?" The answer is "right in front of us." After all, the Times article was based on the public record, including open SEC meetings that were not covered by the media.

April 2004 - Five SEC members met in a basement hearing room to consider an urgent plea by big investment banks. The unanimous decision, changing what was known as the net capital rule, was completed and published in The Federal Register a few months later. I-banks asked for exemption from regulations that limited the amount of debt they could take on. One commissioner questioned the staff about the consequences of the proposed exemption and was told this would be only available for the largest firms—those with assets greater than $5 billion. None of the major media outlets covered this 2004 Proceeding. Last Friday, SEC ended the 2004 program acknowledging that it had failed to anticipate the problems at Bear and other major investment banks. Discussion can now be heard on SEC and NYT Web sites.

Thursday, October 2, 2008

This is a primer on DTCC - if you need - it via Seeking Alpha. Biggest bank in the world that many have never heard of. Registered owner of 99% of all paper (stocks, bonds, securities, etc.). Scary? Perfectly good reason for it - with electronic trading, it is impossible to make timely changes to registered ownership of paper.